Correlation Between Emerald Growth and Vanguard Small-cap

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Can any of the company-specific risk be diversified away by investing in both Emerald Growth and Vanguard Small-cap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Emerald Growth and Vanguard Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerald Growth Fund and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Emerald Growth and Vanguard Small-cap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Emerald Growth with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerald Growth and Vanguard Small-cap.

Diversification Opportunities for Emerald Growth and Vanguard Small-cap

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Emerald and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding EMERALD GROWTH FUND and VANGUARD SMALL-CAP GROWTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small-cap Growth and Emerald Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Emerald Growth Fund are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small-cap Growth has no effect on the direction of Emerald Growth i.e., Emerald Growth and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Emerald Growth and Vanguard Small-cap

Assuming the 90 days horizon Emerald Growth Fund is expected to under-perform the Vanguard Small-cap. In addition to that, Emerald Growth is 1.17 times more volatile than Vanguard Small Cap Growth. It trades about -0.06 of its total potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.16 per unit of volatility. If you would invest  7,087  in Vanguard Small Cap Growth on December 29, 2023 and sell it today you would earn a total of  223.00  from holding Vanguard Small Cap Growth or generate 3.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

EMERALD GROWTH FUND  vs.  VANGUARD SMALL-CAP GROWTH

 Performance 
       Timeline  
Emerald Growth Fund 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Emerald Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Small-cap Growth 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Emerald Growth and Vanguard Small-cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Emerald Growth and Vanguard Small-cap

The main advantage of trading using opposite Emerald Growth and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerald Growth position performs unexpectedly, Vanguard Small-cap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Small-cap will offset losses from the drop in Vanguard Small-cap's long position.
The idea behind Emerald Growth Fund and Vanguard Small Cap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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